Experts of the Messari analytical platform have published a report on the so-called «Coinbase effect» – the theory that listing on the most popular US cryptoexchange necessarily leads to an increase in the prices of digital assets.
The study tests the belief that adding cryptocurrencies to Coinbase has a much more positive effect on their prices than listing on other exchanges, even with relatively high levels of popularity.
First, let’s clarify the details of what is happening. Usually, listing – that is, adding a certain cryptocurrency – to a large exchange does indeed lead to an increase in the value of an asset. Firstly, this improves its reputation, because, for example, if the Binance platform lists a relatively new blockchain project, then it really has potential.
Secondly, the appearance of an asset on a large exchange generates traders’ interest in it. This affects the growth of trading volumes, which ends with an increase in value. After all, the more actively they buy cryptocurrency, the more expensive it becomes. Moreover, to change the prices of projects with a larger market capitalization, the investments of investors must be greater than for relatively young projects. Therefore, the latter usually show more active growth in a short time.
The impact of listings on different cryptocurrency platforms affects asset values in different ways. Messari analysts have checked what numbers are in question.
When and why cryptocurrencies grow
Messari analyzed the performance of 28 new listings on Coinbase within five days of being listed, compared to 22 listings on Binance, 19 on FTX, 19 on Gemini, 14 on OKEx and 11 on Kraken over the same period. While the study found that Coinbase listings had the highest average return at 91 percent, the effect was far from permanent.
Specifically, 28 tokens showed a 32 percent drop to a 645 percent gain in five days. New altcoins on other exchanges, on the other hand, have performed anywhere from a 25 percent drop to 60 percent gains, with the next best average return around 20 percent overall.
Average yield of coins during the first five coins after listing on different exchanges
However, the researchers note that external factors did lead to extreme returns on several tokens shortly after being listed on Coinbase. We are talking about the Distict0x with an increase of 645 percent and the Civic with an increase of 493 percent .
That being said, adding tokens on Coinbase does, on average, generate 29 percent more money for investors than adding tokens to other exchanges.
OKEx was ranked second in terms of profitability. New trading pairs with altcoins here are growing by an average of almost 20 percent . OKEx is followed by Kraken with 15 percent of the same, FTX (12 percent), Binance with little to no gain, and Gemini with plummeting asset prices after listing.
In general, the «Coinbase effect» can be related to the popularity of the exchange and its strong brand, or be a by-product of US cryptocurrency regulation. The fact is that, according to the law, investments of ordinary Americans in new crypto projects are directly prohibited, and Coinbase remains one of the few legal gateways for large investments in altcoins in this case, reports Cointelegraph.
Messari describes Coinbase as «the largest platform for attracting retail investment in cryptocurrencies . » Analysts speculate that the high average returns on newly listed tokens may be due to US retail investors seeking access to previously unavailable investment vehicles.
We believe that it is impossible to predict the behavior of cryptocurrency assets after their listing on the exchange, so there is no need to rely on old results here. In addition, it all depends on the hype around a particular project and the efforts of its marketers. After all, do not forget that after the relatively recent listing of the Alice coin on Binance, its rate increased from the original 10 cents to $ 60, that is, the price increased 600 times. However, the exclusivity factor played here, as the token was exclusively available on Binance.
Alice price chart on Binance
So, first of all, in this matter, you should focus on the development team and the problems that their project solves. If the cryptocurrency has potential, then its value will increase even without listing on centralized exchanges.
